Precisely when the gate was reopened, the wallets of the investors in the digital tourism companies were closed (Photo: ShutterStock)
The prices of flights and hotel rooms are skyrocketing, and this is not good news for the digital tourism giants, whose shares are plunging to a 3-year low.
But - and this is a very significant but: it is possible that the trend of rising interest rates and a possible entry into a global recession may change the situation for them.
The international tourism market was about 5.8 trillion dollars in 2021, according to data from the American survey company Statista.
About 196,000 registered travel and tourism agencies operate in this market alongside hotel, airline, etc. companies, with some of the largest operating digitally.
The shares of the digital tourism companies examined by Walla!
Money and Ma'ariv Businesses fell by nearly 21% on average from the end of 2019 to the end of 2022, and only one of them gained investor confidence during the past year, while the other four fell by about 37.5% on average for the same period.
The US Nasdaq and S&P500 indices, for comparison, have fallen about 33% and about 19% respectively in 2022, and are still up about 16.6% and about 19% since the end of 2019.
One of the biggest decliners is Airbnb, a unit brokerage giant The American resort and residence, which is traded on the Nasdaq stock exchange in the USA with a value of about 54 billion dollars: its share fell by 48.6% during 2022 and by about 41% from the end of 2019 to the end of 2022.
Similar to the short-stay real estate brokerage giant, the price of huge shares was also cut American tourism Expedia and Booking about 51.5% and 16% respectively as of 2022, and about 19% and about 1.9% from the end of 2019 until the period examined (see table).
The only one that painted the investors' screens green was the Chinese company Trip.com, which is traded on the Vienna Stock Exchange, Austria - worth 20.44 billion euros, and jumped about 60% in 2022. The company even came close to its value before the corona epidemic.
Five digital platforms for tourism and their stock performance since 2019 - and from the beginning of 2022 (photo: Walla! system, without)
Cut out the middleman
Sergey Vaschunok, a senior analyst at the Oppenheimer Investment House
, explains: "Like the other tourism companies, the digital tourism companies also experienced the problems of the field during Corona, and they continue to suffer even after the epidemic has come out due to the problems of shortages. The
world has indeed returned to travel, but we are in a situation where there is a shortage in hotel rooms and flights, and their prices go up. And the more hotels are blown up and the more difficult it is to get flights, the less the hotel and aviation companies need the various intermediary players, including the digital ones - and the profitability of these companies is eroded.
In fact, the bargaining power has been transferred from those digital platforms to the hotels and airlines, who demand to reduce the profit margin of those platforms, in order to increase their profit margin. And since the hotel and aviation companies are still unable to meet the existing demands, they needed less intermediaries such as the digital platforms during the year 2022."
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The world is flying again, but when demand exceeds supply, brokerage platforms become redundant (Photo: ShutterStock)
The hope: a decrease in demand
"In addition," Vaschunok explains, "those platforms currently have an interest in lowering the margins and transferring them to hotels and airlines, as they still want to remain relevant for their users by being able to locate hotel rooms and flights, especially when there is a shortage.
In this way, they will be able to succeed the period until the situation changes and the supply manages to meet the demands, or even surpass them. Such a situation can arise precisely in the economic uncertainty that surrounds us today in the shadow of the trend of rising interest rates and the question of recession.
After all, in a difficult economic situation the question arises as to which products and services will be damaged as a result of the reduction in consumer spending, and how it will be damaged From this the tourism industry. Assuming this will lead to a decrease in demand, then those platforms will once again become relevant for the hotel and flight companies, and you will be able to raise the margins (brokerage commissions. CG) they demand of them again.
The declines that occurred in 2022 are the investors' reaction to the expected decline in profits.
In fact, it is a decrease in profit multiples (the ratio between the value of the company and its net profit) since in the end these are technology companies that traded at relatively high multiples.
In light of the expected growth rates on the one hand and the rising interest rate trend that allows alternatives for investors on the other hand, it is understandable why the company's shares are affected."
The Great Wall of China.
The Chinese have a huge and developed domestic tourism market, which meets less large hotel chains and more family businesses, which greatly increased the power of Trip.com, whose value soared while its western competitors eroded (Photo: ShutterStock)
The Chinese syndrome
We also asked Vaschunok about the phenomenon of "Trip.com", the Chinese company that managed to prosper this year against the background of the red color that colored the shares of its competitors:
"In the context of the Chinese Trip.com it should be noted that it relies mainly on the Chinese market as one of the largest online tourism companies in the country which enjoys developed and large-scale domestic tourism.
In addition, its margins are larger because most hotels in China are relatively small family-owned, and there are almost no recognized hotel chains. So a digital company has more power against those hotels that have difficulty reaching a wider distribution as a large platform.
And since the Chinese have also been freed from the corona and returned to traveling the world and in China itself, and along with the expectation that the Chinese market will open up more during the year 2023, the support of the investors in the company can be understood."
Sergey Vaschunok, senior analyst at the Oppenheimer Investment House (photo: Public Relations)
Booking v. Air B.N.B
The domestic tourism market was about 1.2 trillion dollars in 2020 and is expected to be about 6.7 trillion dollars by 2030. And not only the Chinese tend to travel within their country, but this is also the preference of the Americans, who tend to travel more between the states of the American nation and its surroundings than outside the continent .
And Sachunok continues: "Alongside its Chinese rival, the American Airbnb also has a mix of foreign tourism (50%) and domestic tourism (50%) and relies mainly on the American audience. It is true that this is a consumer audience that reacts quickly when there is economic uncertainty, but it is evident that The hotel and aviation companies in the country are unable to meet the demands.
In addition, the company has fierce competition from the American Booking, whose 85% of its revenues come from outside the USA and only 25% from the USA itself. It is worth mentioning that Airbnb traded at a higher value than Booking even though its activity was smaller, and this is also something that probably influenced the decline of the stock.
And despite all this, it should be noted that the multipliers today, after the post-pandemic normalization and in the shadow of the rise in interest rates in the world, stand at about 30 for Airbnb, about 20 for Booking, and about 13 for Expedia.
Looking ahead, this is an established and existing market, because nowadays everyone books flights and hotels using an app or website.
But it should be remembered that the hotels and airlines have also set up websites since the corona virus - and even before that - that allow online booking, and sometimes even more useful than the digital platforms.
Although the hotel cannot reach the same amount of potential customers as those platforms, it does bite into the market share of the latter, and the companies are tested and will be tested for maintaining the profit margin.
The year 2022 was a great year for tourism, but the forecasts for 2023 decreased for all companies, and especially for the technological growth companies.
This raises the question of how the economic slowdown will affect tourism spending, and hence also the digital platforms in the field.
At the same time, it must be remembered that this is a constant upheaval and that the same economic slowdown can also lead the hotel and flight companies to need them more."